Stocks Lower Amid Wholesale Price Inflation Report…..
U.S. equities declined sharply following another hotter-than-expected read on inflation, as well as hawkish commentary from Fed officials, which seemed to complicate the outlook for further monetary policy tightening. January’s Producer Price Index (PPI) came in above estimates, causing more Fed uncertainty that had already ramped up following this week’s elevated consumer inflation report, and yesterday’s much stronger-than-anticipated retail sales data. A busy day of economic data also included a lower-than-projected level of jobless claims, softer-than-forecasted housing construction activity, and an unexpected tumble in manufacturing activity out of Philadelphia. Treasury yields were higher following the inflation report, and the U.S. dollar increased, while crude oil prices nudged lower, and gold was little changed. Q4 earnings season continued to roll on, with Dow member Cisco Systems topping forecasts, though Shopify offered disappointing revenue guidance, and Paramount missed expectations. Asian and European stocks finished higher for the most part, as investors grappled with the U.S. inflation data and monetary policy uncertainty.
The Dow Jones Industrial Average decreased 431 points (1.3%) to 33,697, the S&P 500 Index fell 57 points (1.4%) to 4,090, and the Nasdaq Composite dropped 215 points (1.8%) to 11,856. In moderate volume, 4.1 billion shares of NYSE-listed stocks were traded, and 5.1 billion shares also changed hands on the Nasdaq. WTI crude oil lost $0.10 to $78.49 per barrel. Elsewhere, the gold spot price nudged $0.50 higher to $1,845.80 per ounce, and the Dollar Index increased 0.1% to 104.02.
Wholesale inflation hotter than expected, jobless claims dip, housing data in focus…..
The Producer Price Index (PPI) showed prices at the wholesale level in January rose 0.7% month-over-month (m/m), versus the Bloomberg consensus estimate of a 0.4% gain, and following December’s favorably revised 0.2% decrease. The core rate—excludes food and energy—was 0.5% higher m/m, north of estimates calling for a 0.3% increase, and versus the prior month’s upwardly adjusted 0.3% gain. The headline rate was 6.0% higher y/y, above expectations of a 5.4% increase, and compared to the prior month’s upwardly adjusted 6.5% rise. The core PPI was up 5.4% y/y last month, topping the estimated 4.9% rise and compared to December’s upwardly revised 5.8% growth rate.
Weekly initial jobless claims came in at a level of 194,000 for the week ended February 11, below estimates of 200,000 and compared to the prior week’s downwardly revised 195,000 level. The four-week moving average ticked higher by 500 to 189,500, and continuing claims for the week ended February 4 rose by 16,000 to 1,696,000, just above estimates calling for 1,695,000. The four-week moving average of continuing claims increased by 10,250 to 1,673,000.
Housing starts for January dropped 4.5% m/m to an annual pace of 1,309,000 units, versus forecasts of a decline to a 1,355,000-unit pace from December’s downwardly revised 1,371,000-unit level. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, nudged 0.1% higher m/m to an annual rate of 1,339,000, below expectations calling for an increase to 1,350,000 units, and compared to the upwardly revised 1,337,000-unit pace posted in December.
The Philly Fed Manufacturing Business Outlook Index unexpectedly tumbled further into contraction territory (a reading below zero) for February. The index dropped to -24.3 from January’s -8.9 level, and versus estimates of an improvement to a reading of -7.5.
Treasury rates were higher, as the yield on the 2-year note was up 7 basis points (bps) at 4.67%, the yield on the 10-year note rose 5 bps to 3.86%, and the 30-year bond rate advanced 7 bps to 3.92%.
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